SkyWest Airlines 2012 Annual Report Download - page 50

was primarily due to a reduction in the number of scheduled engine maintenance events during the
year ended December 31, 2012.
Aircraft maintenance expense, excluding reimbursed engine overhauls and engine overhauls for our
CRJ200s under our Fixed-Rate Engine Contracts, decreased $16.8 million, or 3.6%, during the year
ended December 31, 2012, compared to the year ended December 31, 2011. The decrease in aircraft
maintenance expense, excluding engine overhaul costs, for the year ended December 31, 2012,
compared to the year ended December 31, 2011, was principally due to fewer scheduled maintenance
events and certain cost reduction initiatives undertaken during the year ended December 31, 2012.
Additionally, we experienced a $10.4 million reduction in other operating expenses, during the year
ended December 31, 2012, compared to the year ended December 31, 2011. The decrease in other
operating expenses was primarily due to the reduction in property tax expense resulting from refunds
received during the year ended December 31, 2012, a reduction in simulator training expense and a
reduction in legal and consulting expenses.
The items identified above were the principal factors that contributed to the significant
improvement in our financial results during the year ended December 31, 2012, compared to the year
ended December 31, 2011.
During 2012, we reached an agreement with Delta to add 34 additional used dual-class
Bombardier regional jet aircraft in exchange for the early termination of 66 CRJ200 aircraft under our
Delta Connection Agreements. The additional dual-class aircraft were previously operated for Delta by
other regional carriers. We anticipate the 34 additional dual-class aircraft will be subleased from Delta
for a nominal amount. The 34 additional aircraft consist of five CRJ700s and 29 CRJ900s. As of
December 31, 2012, we had taken delivery of 15 of the additional CRJ900s and five of the additional
CRJ700s. We anticipate that the remaining aircraft will be delivered by June 2013. We anticipate that
all 66 CRJ200 aircraft will be removed from the Delta Connection Agreements by December 31, 2015.
Of the 66 CRJ200s scheduled to be removed, 41 CRJ200s are subleased from Delta for a nominal
amount, which are scheduled to be returned to Delta without obligation to us.
During 2012, we signed the American Agreements, which provide for us to operate 23 CRJ200s.
The aircraft flown for American have been removed from our SkyWest Airlines and ExpressJet Delta
Connection Agreements. We started our operations under the American Agreements on November 14,
2012, with 12 aircraft that are being flown out of Los Angeles International Airport by SkyWest
Airlines. The other 11 aircraft were placed into service by ExpressJet on February 14, 2013 and are
operated out of Dallas/Fort Worth International Airport.
Total available seat miles (‘‘ASMs’’) for the year ended December 31, 2012 increased 1.6%,
compared to the year ended December 31, 2011. During the year ended December 31, 2012, we
generated 37.3 billion ASMs, compared to 36.7 billion ASMs during the year ended December 31,
2011.
Critical Accounting Policies
Our significant accounting policies are summarized in Note 1 to our consolidated financial
statements for the year ended December 31, 2012, included in Item 8 of this Report. Critical
accounting policies are those policies that are most important to the preparation of our consolidated
financial statements and require management’s subjective and complex judgments due to the need to
make estimates about the effect of matters that are inherently uncertain. Our critical accounting
policies relate to revenue recognition, aircraft maintenance, aircraft leases, impairment of long-lived
assets and intangibles, stock-based compensation expense and fair value as discussed below. The
application of these accounting policies involves the exercise of judgment and the use of assumptions as
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